South Korea sees the highest investment volume in commercial real estate in 2021

For the last two years, the highest unit-area rates for office properties have been recorded in the Gangnam Business District

Investment in prime offices in Seoul shot up to KRW13 trillion. Stock for you/Shutterstock

Low interest rates and abundant liquidity contributed to the highest investment volume in South Korea’s commercial real estate market, which includes offices, logistics, retail, and hotels. After setting a record-high of KRW54 trillion (USD42 billion) last year, investment in South Korea’s commercial property sector is projected to go down this year due to rising interest rates.

Colliers, in the May edition of its Korean Commercial Real Estate Investment Market report, also mentioned that investment in prime offices in Seoul shot up to KRW13 trillion (USD110.2 billion), which is also a new record.

Korean investors found it difficult to make offshore investments due to COVID. Most investments were concentrated in onshore office markets, and sales prices went up rapidly due to harsher buying competition.

For the last two years, the highest unit-area rates for office properties have been recorded in the Gangnam Business District. The highest per-square-metre price paid for a top office property during that period was USD12,000.

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“Despite rising interest rates, investors’ interest in Korean commercial real estate continues. However, for successful investments in a rising interest rate environment, a mid- to long-term investment strategy will be necessary. Investors should focus on potential rent increases as well as the diversification of investment structure by securing (common stock) investors with a lower required rate of return,” said Sungwook Cho, executive director of Capital Markets & Investment Services at Colliers.

In the meantime, The Korea Herald reported that retail companies in South Korea have been buying property in Seoul’s commercial districts to prepare for new business opportunities.

The retail sector is seeking business recovery by investing in real estate after taking a big hit by closing stores due to the Coronavirus pandemic.

“It’s a recent trend in the retail industry to buy or sell office and commercial buildings as a means to create funds and invest in new business segments,” said Kim In-man, head of the Kim In-man Research Center.

The Property Report editors wrote this article. For more information, email: [email protected].

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